Technology affects nearly every aspect of our lives. Almost everyone has shopped online, found entertainment online, even dated online – shouldn’t the banking industry also be digital? As consumers we expect everything to be available digitally, providing on-the-go access to fit our busy lives. This digital shift is pressuring even slower-moving industries like banking to accommodate.
Surprisingly, it’s not just Gen X/Y users that are moving away from traditional banking methods in favor of digital options – in a recent poll, nearly 60% of account holders age 55 and older claimed to prefer online & mobile banking to visiting a branch.
Demands from old and young consumers alike are causing many financial institutions to rethink where they are spending their resources. Overall, banks are shifting their priorities to invest in developing digital tools rather than physical branches. Last year alone banks closed 1,487 more branches than were opened, the most ever recorded (SNL Financial). In fact, only 3 states in the U.S. had an increase in the number of branches.
While it’s doubtful that in-branch banking will be completely eliminated any time soon, it’s clear that old school banking practices are taking a back seat to more engaging modern solutions. Account holders of all ages appreciate the convenience digital banking tools provide. But what does this mean for the future of banking?
It means that the way people prefer to bank has changed, and financial institutions are adjusting their traditional methods to fit this digital mindset. Banks are closing so many branches because they realize physical branches are not the most effective channel for engaging their account holders in their banking experience.
Think about it: how many times do you unlock your mobile phone every day? Now contrast that with how many times you drive past a branch of your bank or credit union in a day. Not to mention, when you do drive by, are they actually open? And are you really in the mood to stand in a line in order to process your transaction?
It’s no wonder account holders favor digital interactions over in-branch. Which isn’t necessarily a bad thing for institutions. Banks and credit unions now have the opportunity to become closer than ever to their account holders, and be able to interact with them at any given moment. In her American Banker article, Susan Ochs even claims that if financial institutions prove that they are looking out for account holders’ best interests, they can become “intimately” involved in their lives.
It makes sense that trust is extremely important in this relationship, and the way institutions can gain account holders' trust is to prove that they are looking out for their best interests. Susan also goes on to say,
Physical proximity doesn’t limit consumers’ banking choices like it once did, and with so many options available now, the best way to stay competitive is to differentiate yourself by investing in services that complement this digital lifestyle.
Although the shift toward digital channels rocks the banking boat, it also means there is a lot of opportunity to capture wallet share. Consumer tastes are fickle, and for financial institutions, satisfying consumers’ maturing pallets requires more than slightly lower auto loan rates and a new ATM or two.
The key is to invest in products and services that fit into account holders’ evolving lifestyle. Luckily for institutions, fintech allows institutions to fulfill that need while making it more convenient and engaging to bank with them.
In essence, investing in fintech saves you and your account holders money, makes them like you more, and gives your competitors’ customers another reason to take a chance on you.